TORONTO - The Toronto stock market was lower Thursday after a last-minute deal to avert big tax hikes and spending cuts in the U.S. sparked a relief rally on the first trading day of the year.

But buying enthusiasm faded as the deal between the White House and Congress left unsolved several budget measures, mainly government spending cuts.

The S&P/TSX composite index lost 36.67 points to 12,504.1 while the TSX Venture Exchange eased 4.21 points to 1,235.63.

The Canadian dollar edged up 0.01 of a cent to 101.51 cents US.

New York indexes were also weak while traders digested positive jobs data ahead of Friday's non-farm payrolls report for December and looked to the mid-afternoon release of the minutes from the latest U.S. Federal Reserve meeting.

The Dow Jones industrials was down 47.67 points to 13,364.88 as payroll firm ADP reported that the U.S. private sector created 215,000 jobs last month. Economists forecast that Friday's government report would show the economy added 150,000 jobs in December.

Other data showed that more Americans sought unemployment benefits last week, though the winter holidays likely distorted the data for the second straight week.

The Labour Department says weekly applications rose by 10,000 to a seasonally adjusted 372,000. The previous week's total was revised higher.

The Nasdaq composite index was 7.28 points lower to 3,104.98, and the S&P 500 slipped 3.89 points to 1,458.53.

A last-minute deal agreed to by U.S. lawmakers late Tuesday triggered a global market rally on Wednesday, sending the TSX up 107 points and the Dow industrials surged 308 points.

But traders worry that U.S. budget talks could pose a threat to risk appetite for months.

For one thing, while the New Years Eve deal settled tax rates, the deal only postponed automatic spending cuts to defence and domestic programs for two months. And it doesn't include any significant deficit-cutting agreement, meaning the country still doesn't have a long-term plan on how to curb spending.

On top of that, the U.S. government also faces what are likely to be tough negotiations over raising the country's debt limit in February.

Worries about further political wrangling pushed the U.S. dollar higher against many currencies, helping to depress some commodity prices, which also racked up solid gains Wednesday.

That is because a stronger greenback makes it more expensive for holders of other currencies to buy oil and metals which are dollar-denominated.

The energy sector lost 0.5 per cent as the February crude contract on the New York Mercantile Exchange gave back 32 cents to US$92.80 a barrel. Suncor Energy (TSX:SU) lost 21 cents to C$33.20.

February bullion lost $10.90 to US$1,677.90 an ounce, pushing the gold sector down almost one per cent. Goldcorp Inc. (TSX:G) faded 45 cents to C$36.50.

Markets in Japan and mainland China were closed for extended holidays until Friday.

In corporate news, Brookfield Asset Management (TSX:BAM) and New York-based fund manager Pershing Square have resolved a dispute over General Growth Properties (NYSE:GGP), owner-operator of regional shopping malls in 41 states. Brookfield is the largest shareholder of GGP and Pershing controlled the second-largest block when the dispute between the fund managers arose last summer. Regulatory documents filed Thursday show Pershing has dropped efforts to have General Growth sold and Brookfield has agreed to buy GGP warrants held by Pershing. Brookfield shares dipped five cents to $36.55.

Hormel Foods is buying the Skippy peanut butter product line from Unilever for approximately US$700 million as it looks to strengthen its business overseas and branch out beyond its meat business that includes Spam. Skippy, which debuted in 1932, has 11 varieties of peanut butter products. It is the leading brand in China and is sold in more than 30 other countries.